Scalability refers to the capacity to be changed in size or scale to handle a growing amount of work without sacrificing performance. Notably, scalability correlates with decreasing cost due to volume growth. However, the meaning of scalability varies. It applies in diverse areas, from computers to ideas and Economies of Scale in production. For example, computer scalability refers to software applications’ ability to deal with varying data sizes and ease of upgrading software through modular design principles. It also refers to hardware scalability, such as upgrading memory blocks or processors.
Scalability of ideas, Innovation, startup, and company refer to their unique meanings. In such cases, scalability refers to the falling production cost due to the volume growth. Scalability is at the core of the success of ideas, innovations, Startups, cloud platforms, and companies. However, although scalability is related to economies of scale, it is far more than dividing the plant and other fixed costs by the number of units a company produces. For example, software production is highly scalable due to zero copying costs. Unfortunately, software scalability is mainly dictated by the number of customers willing to buy to meet their requirements without requesting customization. Hence, the scalability of software depends on the willingness of multiple customers to buy the same software. Further clarity about scalability in critical areas is explained in the following sections.
Topics of scalability
Economics has two related concepts: economies and diseconomies of scale. If the per unit cost of production goes down due to increased volume, we term that production processes have been experiencing economies of scale. The diseconomies of scale refer to the opposite situation. However, scalability has diverse meanings in different contexts. In this article, the following types of scalabilities are explained:
- scalability of the production process
- scalable business and company
- scalability of design
- scalable computing
- cloud computing scalability
- scalable ideas and innovation
- startup scalability
- scalable technology
- vertical scalability
- horizontal scalability
Explaining ten types of scalabilities
1. Scalability of production process
Scalability of the production process refers to decreasing per unit cost due to increase of the volume, resulting in economies of scale. It happens due to the distribution of fixed costs over multiple units. However, modular design of the production process and adopting software-centric dynamic reconfiguration increase the scalability of production processes. Due to modularity, in serving growing demand, a company can keep improving the scale by adding one after another production module. On the other hand, dynamic reconfiguration with the help of software enables the synchronization of production with the changing demand. For example, cloud computing service production is highly scalable as software can keep turning on and off servers in response to changing demand.
2. Scalable business and company
The scalability of a business refers to the ability to grow without suffering from a diseconomy of scale. The underlying forces of scalability in business are the scalability of products, production processes, and business models. For example, by leveraging outsourcing, a company can rapidly scale up and down without facing much liability. As we know, most companies are not scalable as they suffer limitations in improving quality and reducing costs, resulting in slow customer growth. However, software-centric design and digitization address this limitation. For example, the migration of music distribution from physical media like CD-ROM to streaming has contributed to scaling up the music distribution business.
Due to the business model, software companies experience three types of scalabilities. Software companies engaged in project-based customized software delivery suffer from diseconomy of scale after certain size due to growing overhead from waiting time and rework. However, software companies like Infosys leasing programmers to clients enjoy a linear growth model. On the other hand, due to the zero cost of copying software, companies engaged in trading ideas in the form of software applications experience exponential growth models. Besides, leveraging the Network effect may lead to an exponentially growing positive Externality Effect, making companies more prominent, better, and cheaper.
3. Scalability of design
Scalability of design refers to scaling up the system or product to accommodate growing demand without sacrificing performance and to enjoy decreasing per unit of cost with increasing demand. For example, keeping empty memory slots or a place for GPU offers the option of scaling up computer capacity vertically. Similarly, the software’s modular design allows different modules to run on other computers to handle increasing computational load.
To increase the design’s scalability, replacing hardware with software and adopting software-centric features play a vital role. For example, the performance of a product, even after production, could be scaled up by upgrading the software. Scalability of design also refers to the option of improving performance through 3rd party component plug-ins. For example, modern websites keep evolving with the addition of plug-ins. Similarly, the functionality of smartphones keeps scaling up through the downloading and installing apps.
4. Scalable computing
Scalability in computing refers to the scalability of computers, databases, network, and software. Software scalability refers to increasing the capability by adding plugins due to pursuing modular design principles. The capability of a network to handle growing traffic due to adding subscribers without suffering from performance erosion is known as network scalability. On the other hand, database scalability refers to handling additional data and processing load without experiencing performance degradation. Scalability also applies to the data structure. For example, linked lists are more scalable than fixed-sized arrays. Besides, the scalability of computer systems refers to upgrading computational performance, whether vertically by upgrading processors or horizontally by adding nodes.
5. Cloud computing scalability
The cloud computing platform is both horizontally and vertically scalable due to the scope of increasing the capacity through additional servers and upgrading processors, memory and bandwidth. Besides, statistical multiplexing and virtualization offer the option of accommodating dynamic load in real time without performance degradation. Consequentially, cloud computing scalability provides flexibility, high availability, performance optimization, and cost efficiency. Auto-scaling, load balancing, and microservices architecture are implementation strategies for cloud computing scalability. Besides, leveraging statistical multiplexing may decrease cloud computing service costs by adding subscribers from different time zones, resulting in further scalability.
6. Scalable ideas and innovation
Scalability of ideas refers to attracting a growing customer base and experiencing reduced cost of production or replication with increased volume. However, no great idea is scalable at the beginning. For example, despite the high success of Spotify in distributing and playing music, its predecessor, gramophone, was not scalable. Similarly, word processors in the 1970s were not scalable either. The scalability of ideas depends on the increasing willingness to pay with the additional Flow of Ideas, while the cost of replication of those ideas does not proportionately increase.
An innovation becomes scalable if its technology core is scalable and it is amenable to evolution due to adding or enhancing features to help customers get their jobs done better. However, due to the advancement of the technology core and the evolution of innovation, willingness to pay must grow far more than the growth of marginal cost.
7. Startup scalability
Irrespective of greatness, all startups begin the journey with a minimum viable product (MVP) around an emerging technology core. They incur losses by selling MVPs. Hence, startups are not scalable during the early days, as growing production and selling MVPs lead to increasing total loss. Therefore, they pursue a backed subsidy-led market push. Although such an approach to market growth is attributed to an increase in valuation, startups suffer the risk of sudden valuation collapse due to the stop of VC funding.
Startup scalability refers to the viability of increasing the quality and reducing the cost of MVPs to capture a more significant market share, turning the loss into profit and gaining market power. Hence, startup scalability hinges on the latent potential of the underlying technology core, improving ability, competition scenario, and strategy. For example, ride-sharing startups lack scalability, as app-based taxi service suffers Premature Saturation before taking over mainstream taxi service providers. On the other hand, startups pursuing video and music distribution through streaming over the Internet became highly scalable due to making distribution costs and time lag irrelevant.
8. Scalable technology
Scalability of technology refers to the ease of advancement in improving quality and reducing costs. For example, semiconductor technology is scalable, and due to the advancement in lithography, it has become possible to make transistors smaller, better, and cheaper. Similarly, software technology is highly scalable due to zero cost of copying. On the other hand, the positive network externality effect may even create exponentially growing scalability due to the growth of the customer base. For example, telecom, internet, and network services are scalable as perceived value keeps increasing with the customer base, and the marginal cost of serving customers is negligible.
On the other hand, hardware-centric technologies have limited scalability, as marginal cost reduction suffers limitations due to the cost of material, labor, and energy. Despite this, progress is being made in making hardware-centric technologies scalable through significant scientific advancements. For example, lithium-ion batteries have been experiencing high-level scalability due to the advancement of storing more energy in the same amount of material.
9. Horizontal scalability refers to the expandability of a business or structure along the same level. For example, an educational institution horizontally scales up by setting up additional courses at the same level, say undergraduate. Similarly, by adding manufacturing units, a business horizontally scales up production.
10. Vertical scalability refers to expanding along the value chain for a business. For instance, if it’s feasible for a manufacturing company to move up or down the value chain, that business is vertically scalable. Vertical scalability is about the feasibility of constructing additional floors for a building.
Scalability is no longer limited to typical definitions of economies and diseconomies of scale. This term has varying meanings in diverse contexts. Hence, this article has attempted to define scalability in 10 different contexts.
